Use the tax tools

Choose a view at the top of Tax tools:

• Annual tax breakdown: one year’s taxes by component, its rates and its deduction.
• Conversion scenarios: add or remove fixed annual Roth conversion rules.
• Strategy comparisons: suggestions, and tests of bracket-filling conversions or gain harvesting against your plan as it is.
• Health coverage: marketplace premiums and credits, Medicare premiums and surcharges, by year.
• Early withdrawals: set up a substantially equal periodic payment series; see 72(t) SEPP distributions.

The last four views also show Review household accounts, since each depends on which accounts exist and who owns them.

1. Open Tax tools›Annual tax breakdown.
2. Pick the year in Tax year. It starts at the plan’s first year.
3. Read the components. Total taxes is the sum of federal ordinary tax (including any alternative minimum tax), capital gains tax, state tax, local tax, payroll tax, net investment income tax and early withdrawal penalties.
4. Below the components, check which deduction the year used and the standard deduction available.

Effective rate divides full-year taxes, penalties included, by calendar-year gross income, including taxable withdrawals, employer contributions, realized gains, dividends and the taxable amount of Roth conversions.

Marginal rate is the federal ordinary-income bracket your taxable income reaches. It doesn’t add state tax, payroll tax, or the extra tax a dollar can cause by making Social Security taxable or by crossing a phase-out.

Amounts here are rounded to thousands of dollars ($24k for the example’s total); the Overview year ledger’s Tax breakdown shows whole dollars. Deduction and marginal-rate history lists every year’s rate and deduction, and the Deduction Comparison chart shows the standard and itemized amounts year by year, with a count of the years you itemize. How each component is computed is in How CoastMath calculates income tax.

Manual Roth conversions adds a rule that converts up to a fixed amount each year from a traditional IRA or 401(k) to a Roth account with the same owner.

1. Open Tax tools›Conversion scenarios.
2. Choose the Traditional source, then the Roth destination.
3. Enter the Annual conversion cap ($) and choose Add conversion rule.

This changes your plan, not a copy: the rule is saved in the plan and the whole projection recalculates. Existing conversion and gain-harvesting rules are listed above the form; Remove conversion or Remove rule deletes one. To see what a conversion costs, compare the recalculated plan against a kept baseline: the annual breakdown then states the tax change across the years both projections share. How conversions are taxed is in Roth conversions.

Tax strategy comparison runs your full projection once for each bracket you test and once without a new rule, then ranks them on one objective.

1. Open Tax tools›Strategy comparisons.
2. Under Strategy, choose Roth conversions to fill an income bracket or Capital-gain harvesting to fill a capital-gains bracket, then the accounts.
3. Optionally limit the years with Convert from and Convert until, and set a MAGI cap in today’s dollars.
4. Pick an Objective: end net worth, net estate, lifetime income taxes, or lifetime taxes plus health coverage.
5. Tick the bracket ceilings to test and choose Compare strategies.

Each row shows the objective, its change against the baseline, the amount converted or harvested, lifetime taxes, health costs, net estate, and the number of years with a Medicare surcharge or a lost premium tax credit. The top result is marked best tested: the best of the candidates you chose, not the best possible strategy. A candidate that makes the plan run short says so.

Apply saves that candidate as a rule in your plan and recalculates; remove it under Manual Roth conversions. What this comparison does not do lists the simplifications, such as bracket room being measured before the year’s withdrawals.

Find suggestions, above the comparison, runs your projection once as it is and once for each change below that fits your plan. Nothing is saved.

• Max 401(k): a payroll rule filling the remaining deferral limit, for each person with wages and a 401(k) whose rules don’t already reach it.
• Backdoor Roth: Backdoor Roth turned on for a Roth IRA rule, or a new one added ahead of your last catch-all savings rule, when the first full year’s income less payroll deductions reaches the Roth phase-out start. See Backdoor Roth contributions.
• Max HSA: a payroll rule filling the HSA limit, unless coverage for the year is marked ineligible.
• Roth conversions: bracket-filling conversions to 12%, 22% and 24% for the whole plan, from the largest funded pre-tax account to a Roth account of the same person. Only the best of the three is listed.
• 0% gain harvesting: a harvesting rule for each taxable brokerage account with gains over a known cost basis.

End-of-plan net worth counts pre-tax balances after income tax at the heirs’ income tax rate in Partner and estate, or 24% when it is zero. A change is listed only when that net worth is at least as high and either it rises or lifetime taxes fall, and a plan that lasts still lasts. Each row shows the change in lifetime taxes and in end net worth, in future dollars, and links to the article on that strategy. Plans with flat tax rates get no conversion or harvesting suggestions.

With health coverage turned on in your plan, this view totals marketplace premiums before credits, premium tax credits, and Medicare premiums and surcharges over the plan, and counts the years with an income-related surcharge. A table lists each year’s income relative to the poverty line, premium, credit, Medicare Part B and D, surcharge and total cost. The credit uses that year’s projected income; the Medicare surcharge uses income from two years earlier. See Marketplace coverage and premium tax credits and Medicare premiums and IRMAA.